Pensions Bill

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Clause 100

Exclusion of transfers out in certain cases
Question proposed, That the clause stand part of the Bill.
12.30 pm
Mr. Waterson: I am slightly puzzled by the clause, which is tucked away all on its ownsome. We had significant, substantive debates earlier in our proceedings about transfers in and out of personal accounts, and I wonder what the clause is for. As I read it, it seems to deal only with transfers out of schemes set up under clause 50, but it harks back to the Pension Schemes Act 1993, so perhaps I am wrong about that. It seems to give the Secretary of State a power to make regulations under that Act to prevent transfers out of a clause 50 scheme. On what basis would that power apply, and in what circumstances?
The concerns that we have expressed in previous debates have been about transfers into personal accounts and trying to retain a Berlin wall between existing provision and personal accounts—in other words, trying to ensure that personal accounts do not undermine good and more generous existing provision. The clause seems to be about only transfers the other way, and I am I sure that the Minister can explain it—in a sentence, if he is so minded.
Mr. Greenway: I will be brief, because we want to make some progress. I agree with my hon. Friend and would like the Minister to tell us what the prescribed circumstances are. I may have this wrong, as if so I apologise to the Committee and the Minister—[Interruption.] The other Minister, the Under-Secretary. Not having been able to be in the Committee throughout the whole process, I apologise if this has already been discussed and debated.
The Under-Secretary is nodding reassuringly to say that I am on the right point. In that case, I shall take 30 seconds longer to say that if what I have said is the case, we need him to clarify precisely what the prescribed circumstances will be and what time frame he envisages. If I remember correctly from the questions that we put to both Ministers on when transfers out might be permitted, it will probably be 2017—five years into the personal account arrangement—before that will be allowed. That is nine years away. For the purposes of the record and proper scrutiny, we ought to have something on the record to clarify the position. We cannot just leave it where it was at the end of the public evidence sessions when the Minister for Pensions Reform was one of the witnesses.
Mr. Plaskitt: I know that the hon. Member for Eastbourne hoped that I might dispense with the clause in a sentence. Alas, no, because it is important to clarify exactly what it does. It is right to see it as, in essence, a paving power; that is its purpose. Let me explain how it relates to the earlier clauses to which the hon. Gentleman referred. It is right to say that there is a linkage, but the clause is there for a good reason.
We discussed our commitment to banning most transfers into and out of personal accounts when we debated clause 53. Clause 100 enables the Secretary of State to prohibit personal account members from transferring pension funds to other pension schemes. Our rationale for banning pension fund transfers is to position personal accounts as an effective, complementary addition to the existing private pensions market. The Government’s policy on transfers, and their commitment to review it in 2017—that is important—was widely supported by all stakeholders, as I am sure hon. Members will recall.
Let me explain in some detail why the clause is structured as it is. I think that that will answer the points that have been raised. Chapter IV of part IV of the Pension Schemes Act 1993 gives members of pension schemes the general right to transfer out of their scheme into another one, but section 93(1B) of that chapter contains a limited regulation-making power that enables schemes to ban transfers out in some limited circumstances. However, the power is not broad enough to allow a ban on transfer out of personal accounts, and therefore clause 100(2) widens its scope.
Clause 100(3) amends section 101F of the 1993 Act to enable the Secretary of State to introduce regulations to prevent members from transferring their pension credit benefit, which we discussed earlier, out of the personal accounts scheme. We plan to exercise the regulatory power in subsections (2) and (3) only in respect of the personal accounts scheme.
A second identified example is unvested pension funds. If an individual leaves an exempt scheme during the pre-vesting period, they may be allowed to transfer their accrued funds into personal accounts. Those will be cash transfers, not standard pension transfers of the type that would be prohibited, and the amounts will not count toward the annual contribution limit. The third example, which we discussed earlier, is the discharge of pension shares. That, too, would be appropriate in some circumstances.
However, as I said, the fundamental opportunity to review the matter in its entirety will come with the 2017 review, which is a long way off from now but not so long after the start of personal pensions. That would be the appropriate time to look at it. We will specify in legislation the prescribed circumstances in which personal account members will be prevented from transferring out of the scheme. The legislation will not prevent other transfers between existing pension schemes from taking place. It is important to stress that. The wider position on transfers will be kept under review until later.
The clause is integral to the design of personal accounts schemes. It will allow the Secretary of State to make regulations which will do three essential things: first, keep the scheme focused on serving the needs of the target market; secondly, facilitate the smooth introduction of the new scheme, reducing any risk of market turbulence; and, thirdly, promote simplicity for employers, individuals and the personal accounts administration.
That is why the clause was included. I hope that I have answered hon. Members’ questions and that they will agree to clause stand part.
Question put and agreed to.
Clause 100 ordered to stand part of the Bill.
Clauses 101 and 102 ordered to stand part of the Bill.

Clause 103

Polish resettlement act 1947: effect of residence in poland
Question proposed, That the clause stand part of the Bill.
Mr. Plaskitt: Well, the hon. Gentleman asked for it, so here comes the history.
Mr. Waterson: The Schleswig-Holstein question.
Mr. Plaskitt: Almost. I am very grateful to the hon. Gentleman for giving us the opportunity to visit the question, and I shall give him the history that he asks for.
The Polish Resettlement Act 1947, which is why the clause refers only to Poland, permitted a scheme to be made to award pensions to members of the Polish forces injured or killed during service under British command in the second world war. It provides an equivalent to the main war pension scheme for those forces. The current Pensions (Polish Forces) Scheme 1964 was set up on the basis that at some point after the end of the war, the Polish Government would take responsibility for members of the Polish forces. No Polish Government have, therefore pensions continue in payment for those individuals.
A European Court of Justice ruling in October 2006, on a reference from a Dutch court, found that similar residence restrictions in a Dutch scheme for paying benefits to second world war civilians were contrary to the principle of EU citizens’ freedom of movement between member states, as set out in article 18 of the European convention on human rights. That was notwithstanding member-state competence to make rules for the payment of war pensions. The ECJ held that although the objective of the residence condition of restricting benefits to those connected to Netherlands society was legitimate in principle, the condition was not a proportionate means of achieving the legitimate objective. I am sure that the hon. Gentleman is following this.
Advice received from Ministry of Defence lawyers and Cabinet Office legal advisers confirmed that the residency provision in the 1947 Act cannot be justified in relation to beneficiaries who were EU citizens and had moved to Poland after Polish accession to the European Union on 1 May 2004, unless they received the same amount from Poland as they used to receive in the United Kingdom. The Polish system of war pensions is more restrictive than that provided under the 1964 Scheme, and it therefore does not provide the same benefits. The number of beneficiaries under the Polish scheme is, unfortunately, shrinking fast. It was 730 in 2007, and most beneficiaries are elderly and well settled in the UK. They may be in Eastbourne, in which case they will live quite a long time. It is highly unlikely, therefore, that significant numbers will chose to return to Poland in the remaining years of the scheme. However, some might, which is why the clause is important. The number of beneficiaries who have moved to Poland since 1 May 2004, and who have had their pensions withdrawn, is understood to be fewer than 10. That is the history. That is the reason. I hope, therefore, that the hon. Member for Eastbourne will understand why the clause is in the Bill.
12.45 pm
Mr. Greenway: I am now even happier that Polish plumbers, electricians and builders are contributing income tax and social security payments ensuring that we can continue to afford such pensions being paid to Polish citizens in Eastbourne well over 100 years of age.
Mr. Plaskitt: That is a perfectly valid point and an appropriate note on which to end our brief sojourn into Polish-UK relations.
Question put and agreed to.
Clause 103 ordered to stand part of the Bill.
Clauses 104 to 108 ordered to stand part of the Bill.
Further consideration adjourned.—[Mr. David.]
Adjourned accordingly at thirteen minutes to One o’clock till this day at Four o’clock.
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Prepared 20 February 2008